Malawi’s major donors under the Common Approach to Budget Support (Cabs) have defended the decision by the Federal Republic of Germany to change its membership status from Cabs to an observer.
According to the Cabs Chairperson Alexander Baum, who is also European Union (EU) Head of Delegation, Germany’s decision reflects the country’s position not to provide budget support to Malawi in recent years.
“From the Cabs Chair perspective, I can say that Germany’s decision to downgrade their participation in Cabs reflects their actual position over the past two to three years of not disbursing budget support,” said Baum in a written response to Business News.
Germany announced last week a change in its membership status within the Common Approach to Budget Support (Cabs) to an observer status with immediate effect.
This means that Germany—a longtime development partner for Malawi since independence in 1964—will no longer provide budget support for Malawi in the subsequent national budgets, according to a source at Ministry of Finance.
“This is Germany’s sovereign decision, which does not have an impact on the decisions on other Cabs members, which all take their individual decisions on disbursements and more generally on using budget support as an instrument,” said Baum.
The current Cabs group members are the African Development Bank, DFID, the European Union, Norway and the World Bank.
The International Monetary Fund (IMF), UNDP, Ireland and now Germany have their status within Cabs as ‘observers.’
Last week, economic experts warned that the exiting from Cabs by Germany would pile pressure on Malawi’s ability to finance for the 2014/15 budget as budget support provides a substantial chunk in the fiscal plan.
In the 2013/14 budget, donors earmarked to contribute 41 percent of the total budget.
The decision by Germany to change its status within Cabs comes in the middle of continued withholding of budget support by Cabs grouping towards the 2013/14 budget following revelations of plunder of public resources at Capital Hill which was exposed following the shooting of then Ministry of Finance Budget Director Paul Mphwiyo as he entered the gate of his Area 43 residence in Lilongwe on September 13 last year.
About $150 million (over K60 billion) is still withheld by Cabs members as budget support-which in essence helps Malawi cushion its Balance of Payments (Bop) position and beefs up the country’s foreign exchange reserve position.
German Ambassador to Malawi Peter Woeste said last week it is important to the people of Germany that ‘every cent of their hard earned tax payers money’ reaches those who are really in need and brings relevant improvements to their livelihoods.
On one hand, the Malawi Economics Justice Network (Mejn) executive director Dalitso Kubalasa yesterday described the decision by Germany as “quite an interesting development to say the least” saying it clearly shows that there could be more reasons behind such a decision.
